CRC incentive dropped in Spending Review

Businesses will be taking in the news that the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme cash-back incentive has been removed in the government's spending cuts.

The plan for the scheme was to give money back to companies raised from permits to cover green house gas emissions from their energy use.

The scheme would have rewarded companies for lowering their carbon emissions and punished those who lagged behind.

The government will now keep the funds to boost public finances, roughly worth £1 billion a year and companies will have to start paying into the scheme from 2012.

In a reaction to the news CBI director-general, Richard Lambert, said: "Businesses that have just signed up to the flagship Carbon Reduction Commitment energy efficiency scheme will be very let down by the Government's unexpected announcement that it will remove the cash-back incentive.

"A scheme that was meant to change behaviour by encouraging energy efficiency has now become another stealth tax."

In general Mr Lambert was positive about the strategic direction of the government's spending review and decisions on the environment, he said: "By contrast, the commitment to clean coal technology, manufacturing off-shore wind turbines, and renewable heat and flood defences will boost private sector confidence in investing in low-carbon technology."

The British Retail Consortium, however, said British retailers were 'surprised and dismayed' at the government's change of direction on the scheme, describing the move as 'appalling'.

British Retail Consortium director general Stephen Robertson said: "We are surprised and dismayed that the £1bn per year participating businesses will put in to the Carbon Reduction Commitment scheme is no longer to be recycled to participants but is instead to be pocketed by the Exchequer.

"This is a stealth tax on business which not only goes back on the commitments given in developing the scheme but removes a major source of incentives to reduce carbon emissions."

Carbon Clear, a carbon management consultancy, said the CRC would cost companies more and while they believe administration will be simpler, the monitoring and reporting will be complex.

Their head of CRC, James Ramsay, said: "The CRC is now a tax and will be enormously more expensive for businesses and public sector organisations. In terms of its impact, this change will accelerate the take up of energy and carbon reduction measures.

"Whilst existing participants will welcome simplification of the scheme, these changes leave the door open for government to expand it to other organisations not currently captured." Alison Brown